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According to the trade-off theory, how is the capital structure determined? Firms have an incentive to add leverage to the capital structure. Briefly describe an

According to the trade-off theory, how is the capital structure determined? Firms have an incentive to add leverage to the capital structure. Briefly describe an incentive to add leverage.Then, refer to Equation 16.10 in the material this week and explain how indirect costs of financial distress affect firms in different ways.

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